Trade Businesses and State Licensing Compliance

June 02, 2021
by a searcher from Duke University in Tulsa, OK, USA
The trade industries (electrical, HVAC, etc) are a common acquisition target for searchers and one of the major challenges is that the searcher is not licensed in that field. The common approach seems to be to have a key employee hold the state license and that is clearly a risk point since the business is dependent upon that employee's continuing to stay with the company and be healthy.
What have people done before to manage this risk? I personally have thought about negotiating employment contracts with the license holder such that they get a large bonus after X number of years. What if the licensed employee has a personal or family health crisis that forces them to leave the company? How easy is it to have a backup employee with the license or to backfill the role?
If I pursue one of these businesses it may take a number of years before I personally can hold the license and want to know how to manage the risk when evaluating trade businesses for an acquisition. Thank you ahead of time for your input.
from Harvard University in Toronto, ON, Canada
from University at Albany, State University of New York in Miami, FL, USA